It’s here. We’re now entering the thick of earnings season, with more companies scheduled to report their numbers this week than any other week of the quarter. And an already-volatile time of year is made even more volatile this time around as investors start to wonder if the recent earnings growth pace can be sustained. Even the bluest of the blue-chip stocks aren’t immune price jolts, if the right headlines catch investors’ attention in the right way.
Not all volatility has to be bad volatility, however. Sometimes, earnings news can push a stock firmly higher without any warning.
To that end, here’s a run-down of the top 10 blue-chip stocks to buy for investors willing to take a bit of a gamble on an earnings-driven pop.
Obviously there are never any guarantees, but in all 10 cases there’s either a history or a special situation (if not both) that suggests an earnings bump may be in the cards.
Salesforce.com (CRM)
Salesforce.com (NYSE:CRM) isn’t a cheap stock by anybody’s standards. Even on a forward-looking basis, the forward P/E of 52 is tough to swallow.
This is a name, however, where the valuation just hasn’t mattered. It has been all about the growth story and its reliability. The top line is projected to grow more than 25% this year, and more than 20% next year, with even faster earnings growth in the cards. And, Salesforce.com hasn’t failed to beat a quarterly earnings estimate in years.
In that light, Bret Kenwell was right on Monday when he explained the 13% pullback that CRM stock has made since its record high from four weeks ago (the biggest correction ithas suffered in years) is a gift to investors who’ve been biding their time.
Apple (AAPL)
It’s almost a little bit cliche to name the world’s biggest and most profitable companies — as well as a consistently-growing company — to a list of blue-chip stocks that should see a bit of a bump on the heels of yet-another solid earnings report. But, Apple (NASDAQ:AAPL) is a name that you don’t want to bet against.
The past couple of earnings reports created particularly strong, bullish responses. AAPL stock jumped 6% on Aug. 1 following the release of its fiscal Q3 numbers, and it was up more than 4% on May 2 on the heels of its fiscal Q2 report. And more than that, both earnings reports ultimately prompted what’s become a 30% gain since early May.
Apple will post its fiscal Q4 results on Nov. 1.
Herbalife Nutrition (HLF)
Herbalife Nutrition (NYSE:HLF) is one of those names that has severely punished anyone who bet against it in front of recent earnings reports. Granted, the post-earnings pops are short-lived events. The stock ultimately ended up moving lower than it was right before the company released its quarterly numbers in early May and early August. But, what a ride while it lasted!
The specifics: HLF stock surged 4.4% on May 4, and was up 13% on Aug. 3, following its prior two earnings reports … and was also up a little more two days after their last two earnings releases. That, however, was about as far as the post-earnings bullishness went.
Herbalife has managed to beat its earnings estimates for three straight quarters now, and will hopefully make it four in a row come Oct. 30.
Becton Dickinson (BDX)
Becton Dickinson (NYSE:BDX) isn’t exactly a household name. Though it sports a market cap of $61 billion, the medical equipment company just doesn’t turn many heads.
But, maybe it should. The company has topped quarterly earnings estimates in years, and hasn’t failed to grow them in years.
That said, know that BDX stock isn’t one that normally takes flight immediately after better-than-expected reports of earnings growth. But, down 7% just since the end of last month, Becton Dickinson could be ripe for a news-based reversal.
AbbVie (ABBV)
AbbVie (NYSE:ABBV) has been a little more hit-and-miss following the delivery of quarterly reports of late … and arguably more miss than hit. The stock’s down 34% from its February high, and hasn’t always responded well to the company’s earnings news.
The company itself, however, has done everything it’s supposed to do … and more. Decided year-over-year earnings growth is the norm in every quarter, and AbbVie hasn’t failed to top a quarterly earnings estimate in years. Better still, sales of its lymphoma drug Imbruvica are still in ramp-up mode after winning approval for new indications, growing 35% during the second quarter to $850 million. The company anticipates peak sales of $7 billion for Imbruvica, leaving the company plenty of room to keep growing its top and bottom lines despite its Humira headwind.
All of a sudden the stock’s big pullback this year looks like an opportunity, underscored by a forward-looking P/E of only 9.3.
UnitedHealth Group (UNH)
The advent of the Affordable Care Act may have flooded UnitedHealth Group (NYSE:UNH) with revenue-bearing customers, but this business wasn’t necessarily profitable. Though revenue has grown every quarter since 2012, net income has been flat, and occasionally negative on a year-over-year basis.
That is, until 2016 when the health insurer started to drop participation in ACA exchanges in more and more states. It turned out to be the right move. And now, President Donald Trump’s version of what healthcare should look like in the United States could prove even more beneficial to the company. Thing is, most investors have yet to take a good long look at how well UnitedHealth is growing again. Revenue is on pace to grow 12% this year, driving a 27% increase in per-share profits.
Though the company won’t post its next quarterly report until January, it may be worth the wait if that’s when the market finally realizes what’s going on.1
Adobe (ADBE)
Curiously, Adobe (NASDAQ:ADBE) shares have not responded favorably to any of the company recent quarterly reports … a strange outcome in light of the fact that revenue and earnings have both been growing like crazy since 2015. The organization has developed an entire suite of cloud-based business tools, and the world loves them.
Take a closer look at the stock’s chart though. While ADBE stock often peels back following an earnings report, the bigger-picture trend is still bullish. Adobe shares are up more than 200% since their early 2016 low, and despite the pullback from their peak early last month, the bigger trend is still a bullish one.
It may take a while for Adobe stock to respond bullishly to a positive earnings report, but it will likely be worth the wait.
Boeing (BA)
Boeing (NYSE:BA) shares don’t have much of a history of jumping following quarterly earnings reports. In fact, BA stock doesn’t have much of a bullish history at all for the past several months. The current price of $347 is right where the stock was back in February. Shares just can’t get airborne.
Something has changed for the better though. That is, the perception of Boeing’s future is much brighter than it was just a few quarters ago. With its most recent passenger jet market outlook, Boeing opined that the airline industry would need to take delivery of more than 42,000 aircraft over the course of the next 20 years to meet the demand stemming from an annualized increase 4.7% in air travel for the same timeframe. Better yet, investors are starting to understand how Boeing fits into the picture. It’s still the preferred provider of the world’s passenger jets, setting the stage for a bullish response to proof that it’s growing.
The company will get another chance to prove it on Oct. 24, when it’s expected to post its quarterly results.
Texas Instruments (TXN)
It’s often left out of the discussion about the broad technology market, as it doesn’t make the microprocessors, graphics cards and memory chips that dominate the landscape. Don’t let the lack of attention fool you though. Texas Instruments (NASDAQ:TXN) is as much of a tech name as any other player, supplying many of the less-touted components that are still just as necessary to make the Internet of Things and artificial intelligence work.
TXN stock doesn’t necessarily bolt higher in response to earnings reports; it very much does its own thing, with bad news or good. But, down more than 15% just since August’s high, the earnings news due after the closing bell rings on Oct. 23 may remind the market that the company has topped estimates in eleven of its prior twelve quarters. Tuesday’s could be the thirteenth.
CSX (CSX)
Finally, the industry be old, but railroading is still relevant. That’s why CSX (NASDAQ:CSX) is one of the few blue-chip stocks to buy for traders looking to juice their portfolio.
Yes, the meltdown of oil and coal prices a couple of years back proved problematic. This year has been a different story though. With the United States now the world’s biggest producer of crude and coal at least making some sort of comeback, this year’s rail traffic in the U.S. is as robust as it has been in four years. That bodes well for CSX, which has not only topped earnings estimates in each of its past four quarters, but has logged outstanding earnings growth. The bottom line is expected to grow 66% this year, and keep growing next year.
CSX stock has pulled back since last week’s third-quarter release, and won’t report again until January. It’s one of those names, though, that could be worth the wait. This company is quietly standing in the middle of the economic revival, even if few people have taken notice yet.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
